DY. COMMISSIONER OF INCOME TAX, CIRCLE - 01, VARANASI vs. PERFECT TECNO COUNSULTANTS PVT. LTD. , VARANASI

PER SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER: This appeal, filed byRevenue,has arisen out of the appellate order passed by learned Commissioner of Income-Tax(Appeals)(hereinafter called “the CIT(A)”) in Appeal No.CIT(A),Varanasi/10359/2019-20/70, dated 07.09.2020 u/s 250 of the Income-tax Act, 1961(hereinafter called “the Act”) for assessment year 2017-18 , which appeal before ld. CIT(A) had in turn arisen from an ex-parte assessment order dated 18.12.2019 (Order No. ITBA/AST/S/144/2019-20/1022569847(1)) passed by ld. Assessing Officer (hereinafter called “the AO”) u/s 144 of the 1961 Act. This appeal was heard in Open Court proceedings through physical hearing mode. 2. The Revenue has raised following grounds of appeal in Memo of Appeal filed with Income Tax Appellate Tribunal, Circuit Bench, Varanasi(hereinafter called “ the tribunal”) :-

ITA No.139/Vns/2020 Assessment Year: 2017-18 DCIT, Circle-1, Varanasi, U.P. v. Perfect Techno Consultants Pvt. Ltd. “1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 17,21,914/- made by the AO on account of unexplained cash credits u/s 68 of the Act, 1961. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 31,00,000/- made by the AO on account of unexplained money/cash deposits u/s 69A of the Act, 1961. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred indeleting the addition of Rs. 9,83,50,000/- made by the AO on account of unexplainedmoney/cash deposits u/s 69A of the Act, 1961. 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,90,99,269/- made by the AO on account of unexplained trade payables. 5. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred indeleting the addition of Rs. 1543,065/-[Rs. 17,45,610-2,02,545] (Confirmed) as reflectedin 26AS. 6. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred indeleting the aforesaid additions without providing an opportunity of being heard to theAO as the assessment has been concluded u/s 144 of the I.T. Act, 1961. 7. Right is reserve to alter, modify and to file any fresh grounds of appeal.” 3. The brief facts of the case are that the assessee filed e-return of income with Revenue for the impugned assessment year , on 31.10.2017 , declaring total income ofRs. 70,57,470/- and book profit of Rs. 48,88,227/- u/s. 115JB(2) of the 1961 Act. The assessee’s case was selected by Revenue for framing complete scrutiny assessment through Computer Aided Scrutiny Selection(CASS) with the reasons mainly “cash deposit during demonetization period”. Statutory notices were issued by AO u/s. 143(2) , dated 21.09.2018 and 09.10.2018 to the assessee , which were claimed by AO to have been duly served on the assessee . But the assessee did not comply with said notices and no response/reply was filed by assessee before the AO. Thereafter, the AO issued several notices u/s 142(1), dated 21.01.2019, 02.08.2019 , 20.09.2019 , 16.10.2019 and 23.11.2019 to the assessee, asking assessee to file details in support of income filed. The aforesaid notices u/s 142(1) were also claimed by the AO to have been duly served on the assessee. But again , the assessee did not comply with the aforesaid notices issued by AO u/s 142(1), and no response/reply was filed by the assessee before the AO. Thereafter , a detailed Show Cause Notice(SCN) was issued by AO on 08.12.2019 to the assessee, which was also 2

ITA No.139/Vns/2020 Assessment Year: 2017-18 DCIT, Circle-1, Varanasi, U.P. v. Perfect Techno Consultants Pvt. Ltd. claimed by the AO to have been duly served on the assessee.The assessee did not comply with aforesaid SCN also, as no reply/submissions/explanations were filed by the assessee before the AO during the course of assessment proceedings . Since the assessment was getting time barred, the AO framed an ex-parte assessment against the assessee vide order dated 18.12.2019 u/s 144, computing /assessing income of the assessee at Rs. 13,21,93,610/- as against returned income of Rs. 70,57,470/-, wherein as many as six additions were made by the AO, detailed in assessment order. 4. The assessee being aggrieved by the aforesaid ex-parte assessment framed by AO filed first appeal with ld. CIT(A), and challenged all the additions as were made by the AO before ld. CIT(A). . The assessee filed submissions/evidences for the first time before ld. CIT(A) which were in the nature of additional evidences as the assessee never filed any reply/explanation/submissions/evidences before the AO during assessment proceedings. The ld. CIT(A) admitted and accepted these additional evidences/replies/submissions/explanations as filed by the assessee for the first time before ld. CIT(A), and deleted as many as four additions completely and deleted the fifth addition substantially out of the aforesaid six additions, while only addition of Rs. 11,19,380/- was sustained by ld. CIT(A). The ld. CIT(A) did not call for remand report/comments from the AO on these evidences /replies/submissions/explanations filed by the assesseefor the first time before ld. CIT(A), before granting substantial relief to the assessee, despite the fact that the assessee did not filed any reply/submissions/evidences/explanations before the AO during assessment proceedings and an ex-parte assessment order was passed by the AO u/s 144. 5. The Revenue being aggrieved by appellate order passed by ld. CIT(A) granting aforesaid substantial relief to the assessee has filed this second appeal with tribunal.The assessee has not filed an appeal challenging the addition of Rs. 11,19,380/- sustained by ld. CIT(A). The ld. CIT DR opened arguments before the 3

ITA No.139/Vns/2020 Assessment Year: 2017-18 DCIT, Circle-1, Varanasi, U.P. v. Perfect Techno Consultants Pvt. Ltd. Division Bench. At the outset, the learned CIT DR submitted that the assessee did not cooperated before Assessing Officer during the course of assessment proceedings, and did not filed any detail/replies/explanations/submissions/evidences before the Assessing Officer , despite several opportunities granted to the assesseeby the Assessing Officer. The ld. CIT DR drew our attention to page 1-2 of the assessment order, wherein learned Assessing Officer referred toseveral notices u/s 143(2) and 142(1) of the 1961 Actincluding SCN issued to the assessee by the AO , but the assessee did not comply with any of these notices wherein the assesseedid not file any explanation/submissions/replies/evidences etc. before the Assessing Officer, which led AO to pass an ex-parte assessment order against the assessee u/s 144, computing income of the assessee at Rs. 13,21,93,610/- as against the returned income of Rs. 70,57,470/-. The learned CIT DR drew our attention to several additions being made by the Assessing Officer while passing an exparte assessment order, as the assesseedid not give any reply/submissions/explanations/evidences etc. before the AO to the queries raised vide several notices issued by the AO to the assessee. The learned CIT DR submitted that the matter reached ld. CIT(A) wherein the assessee filed first appeal before ld. CIT(A) , and the learned CIT(A) partly allowed the appeal of the assesseegranting substantial relief to the assessee , wherein ld. CIT(A) deleted as many as four additions completely and deleted the fifth addition substantially out of the aforesaid six additions, while only addition of Rs. 11,19,380/- was sustained by ld. CIT(A). It was submitted by learned CIT DR that the assessee filed some evidences/explanations etc. before ld. CIT(A) which were in the nature of additional evidences filed by the assessee for the first time before ld. CIT(A), which were admitted and accepted by ld. CIT(A) without any verification, and also without giving the Assessing Officer any opportunity whatsoever of being heard by learned CIT(A) as no remand report/comments were called by ld. CIT(A) from the AO on these evidences/explanations/replies/submissions etc. filed by the assessee for the first time before ld. CIT(A), and thus there is a violation of Rule 46A 4

ITA No.139/Vns/2020 Assessment Year: 2017-18 DCIT, Circle-1, Varanasi, U.P. v. Perfect Techno Consultants Pvt. Ltd. of Income-tax Rules, 1962 as well as provision of Section 250(1) and 250(2) of the Income-tax Act, 1961 are breached. The ld. CIT DR submitted that the submissions/evidences/ replies / explanations etc.filed by the assessee were accepted by learned CIT(A) without giving any opportunity to the Assessing Officer to rebut the same as no remand report/comments from the AO on thesesubmissions/evidences/ replies / explanations filed by the assessee were called by ld. CIT(A), and there is a breach of principle of natural justice because the AO is also one of the litigating party before ld. CIT(A) . The ld. CIT DR prayed for allowing the appeal of the Revenue. 5.2 The learned counsel for the assesseeon the other hand admitted that notices issued by AO u/s 143(2), 142(1) as well SCN as mentioned in page 1-2 of assessment order were received by the accountant of the assessee which were sent by AO via email , but the said accountant left the assesseewithout bringing these notices to the knowledge of the assessee’s Directors/management, and that is the reason why the assessee could not file any reply/submissions/explanations/evidences before the Assessing Officer. It was submitted by learned counsel for the assessee that the replies/explanations/evidenceswere submitted by the assesseebefore ld.CIT(A) , whose powers are co-terminus with the power of the Assessing Officer. The ld. Counsel for the assessee fairly submitted that these submissions/ evidences filed before the ld.CIT(A) were additional evidences filed for the first time before ld. CIT(A) who accepted the same, without calling for the remand report/comments from the AO. The learned counsel for the assessee fairly admitted that no submissions/evidencesetc. were filed by the assesseebefore the Assessing Officer during the course of assessment proceedings. The ld. Counsel for the assessee submitted that powers of ld. CIT(A) are co-terminus with the powers of the AO, and there was no need for ld. CIT(A) to call for any comments/remand report from the AO on these additional evidences filed by the assessee before ld. CIT(A) for the first 5

ITA No.139/Vns/2020 Assessment Year: 2017-18 DCIT, Circle-1, Varanasi, U.P. v. Perfect Techno Consultants Pvt. Ltd. time. The ld. Counsel prayed that the appellate order of ld. CIT(A) be upheld and the appeal filed by Revenue be dismissed. The ld. Counsel for the assesseerelied upon the following judicial precedents, in support of his contentions,as under:- i. Judgment and order of Hon’ble Supreme Court in the case of CIT v. McMillan & Co. , reported in (1958) 33 ITR 182(SC) ii. Judgment and order of Hon’ble Supreme Court in the case of CIT v. Kanpur Coal Syndicate, reported in (1964) 53 ITR 225(SC) iii. Judgment and order of Hon’ble Kerala High Court in the case of K. Mohammed v. ITO , reported in the case of (1977)107 ITR 808(Ker.) iv. Judgment and order of Hon’ble Calcutta High Court in the case of CIT v. Ranicherra Tea Co. Limited, reported in (1994)75 TAXMAN 164(Cal.) v. Judgment and order of Hon’ble Madras High Court in the case of CIT v. T.T. Krishnamachari&Co.. , reported in (1997)90 TAXMAN 88(Mad.HC) 6. We have considered rival contentions and perused the material on record including cited case laws. We have observed that the assessee is a company and had filed e-return of income with Revenue for the impugned assessment year , on 31.10.2017 , declaring total income of Rs. 70,57,470/- and book profit of Rs. 48,88,227/- u/s. 115JB(2) of the 1961 Act. The assessee’s case was selected by Revenue for framing complete scrutiny assessment through Computer Aided Scrutiny Selection(CASS) with the reasons mainly “cash deposit during demonetization period”. Statutory notices were issued by AO u/s. 143(2) , dated 21.09.2018 and 09.10.2018 to the assessee , which were claimed by AO to have been duly served on the assessee . But the assessee did not comply with said notices and no response/reply/submissions/evidences etc. were filed by assessee before the AO. Thereafter, the AO issued several notices u/s 142(1), dated 21.01.2019, 02.08.2019 , 20.09.2019 , 16.10.2019 and 23.11.2019 to the assessee, asking assessee to file details in support of income filed. The aforesaid notices u/s 142(1) were also claimed by the AO to have been duly served on the assessee. But again , the assessee did not comply with the aforesaid notices issued by AO u/s 142(1), and no response/reply/explanations/submissions/ evidences etc. were filed by the assessee before the AO in response to the queries raised by the AO. Thereafter , a detailed Show Cause Notice(SCN) was issued by AO on 08.12.2019 to the assessee, 6

ITA No.139/Vns/2020 Assessment Year: 2017-18 DCIT, Circle-1, Varanasi, U.P. v. Perfect Techno Consultants Pvt. Ltd. which was also claimed by the AO to have been duly served on the assessee. The assessee did not comply with aforesaid SCN also, as no reply/submissions/explanations/evidences etc. were filed by the assessee before the AO during the course of assessment proceedings . Since the assessment was getting time barred, the AO framed an ex-parte assessment against the assessee vide order dated 18.12.2019 u/s 144, computing /assessing income of the assessee at Rs. 13,21,93,610/- as against returned income of Rs. 70,57,470/-, wherein as many as six additions were made by the AO, detailed in assessment order. It is an admitted position that all the aforesaid notices issued by the AO during the course of assessment proceedings were all received by the assessee but the assessee chose not to file any reply/explanation/submissions/evidences etc before the AO. Now it is stated by ld. Counsel for the assessee that the accountant of the assessee received the aforesaid notices issued by the AO but did not brought the same to the notice of the assessee’s Director/Management , which was the reason for non compliance by the assessee in not filing any reply/explanations etc. before the AO. It is claimed that the said accountant is no more working with the assessee and has left the organization. This is merely a balled statement now made for the first time before the Bench, and no affidavit of the Directors/Management to aver this contention is filed during the course of appellate proceedings before the tribunal or ld. CIT(A). Nor any details of the accountant or affidavit from the said accountant is filed. It is an admitted position that all the aforesaid notices issued/sent by the AO by sending to the registered email id of the assessee, were received by the assessee , and the assessee cannot take this plea now at this stage that the accountant of the assessee did not brought these notices to the Knowledge of the Directors/management of the assessee. The assessee has filed Paper Book containing 130 pages, which also carries reply filed by the assessee before ld. CIT(A), and we have observed that the assessee never raised this issue of the accountant having not brought to the knowledge of Directors/Management about the receipts of the aforesaid notices issued by the AO which was duly received at the registered email id of the assessee 7

ITA No.139/Vns/2020 Assessment Year: 2017-18 DCIT, Circle-1, Varanasi, U.P. v. Perfect Techno Consultants Pvt. Ltd. with department. The Revenue is obligated to issue and serve notices as is mandated under the 1961 Act , which AO did by sending the notices to the registered email of the assessee with the department, and it is also not disputed that all these notices were received by the assessee at its registered email id. The only balled averment now made before the Bench, without filing any affidavit of Directors/management , is that the accountant of the assessee received all the aforesaid notices but failed to bring the said notices to the knowledge of Directors/management , and it is further claimed that said accountant now left the company, and even the name of the accountant is not given and also no affidavit of the said accountant is filed nor any affidavit from Directors/Management is filed. Under these facts and circumstances, this plea lack merit and is rejected. Proceeding further, the assessee has claimed to have filed evidences/explanations/ replies/ submissionsetc. before learned CIT(A) for the first time during the course of appellate proceedings before ld. CIT(A). The learned CIT(A) admitted those evidences/ explanations/replies/ submissions etc. filed by the assessee for the first time before him during appellate proceedings and granted substantial relief to the assessee, but did not call for any remand report / comments from the Assessing Officer on these additional evidences/replies/submissions/explanations etc. which are filed by assessee for the first time before ld. CIT(A), which is clearly in breach of Rule 46A of the 1962 Rules. Further, the AO is one of the litigating party before ld. CIT(A) , and ld. CIT(A) was also required to issue notice of hearing to the AO to enable AO to represent his case before ld. CIT(A). Reference is drawn to the Provisions of Section 250(1) and 250(2) of the 1961 Act. There is a clear violation of principles of natural justice as the Assessing Officer is one of the litigating party before ld.CIT(A) and it was incumbent on the CIT(A) to have issued notice of hearing to the Assessing Officer to enable AO to appear/represent his case before ld. CIT(A). Further,the ld. CIT(A) failed to call for the comments / remand report of the Assessing Officer on these additional evidences filed by assessee for the first time before ld. CIT(A). The ld. CIT(A) also failed to appreciate that the assessee did not 8

ITA No.139/Vns/2020 Assessment Year: 2017-18 DCIT, Circle-1, Varanasi, U.P. v. Perfect Techno Consultants Pvt. Ltd. filed any reply/ explanation/submissions/evidences etc. before the AO and the AO was compelled to pass an ex-parte assessment order u/s 144 of the 1961 Act in the absence of the assessee and to meet the time barring limitation as prescribed by statute.Adherence to principles of natural justice and grant of effective hearing to both the litigating parties is not a mere empty formality a mere ritual, rather is cardinal to a robust and effective judicial delivery system. These evidences/replies/explanations/submissions etc. filed by the assessee for the first time before learned CIT(A) also never stood the verification by the AO as to their truthfulness and correctness before being accepted, while substantial relief was granted by ld. CIT(A). Under these circumstances, the grievance of the Revenue is legitimate and Revenue has rightly raised the grounds of appeal nos. 1 to 6 in the memo of appeal filed with tribunal, and under the facts and circumstances of the case, we are of the considered view that the appellate order of ld. CIT(A) is required to be set aside on the issue’s raised by Revenue in their grounds of appeal no. 1 to 6, and matter is required to be set aside and restored back to the file of the learned CIT(A) for fresh adjudication on merits after giving proper and adequate opportunity of hearing to the assessee as well to the ld. Assessing Officer , in accordance with principles of natural justice , as is also required keeping in view provisions of Section 250(1) and 250(2) of the 1961 Act, and Rule 46A of the 1962 Rules. The case of the assessee was selected for framing complete scrutiny assessment through CASS with reasons mainly “cash deposit during demonetization period” .The assessee did not co-operated before ld. AO during the course of assessment proceedings as no reply/explanations/ submissions/evidences etc. were filed by the assessee before the AO during assessment proceedings despite sufficient and adequate opportunity of being heard granted by the AO, and an ex- parte assessment order was passed by the AO u/s 144 to meet the limitation period as prescribed under the statute. It is a matter of record that very low percentage of returns of income are selected by Revenue for framing scrutiny assessment .The 1961 Act is an code in itself and there are several provisions under the 1961 Act 9

ITA No.139/Vns/2020 Assessment Year: 2017-18 DCIT, Circle-1, Varanasi, U.P. v. Perfect Techno Consultants Pvt. Ltd. such as compliances of provisions of Section 37(1) of the Act to substantiate that the expenses were incurred wholly and exclusively for the purposes of the business of the assessee, Section 68 dealing with cash credits , compliances of Section 69, 69A, 69B , 69C of the 1961 Act dealing with unexplained investments, unexplained money, unexplained expenditure etc. , deducting of income-tax at source on payments made by tax-payers(Chapter XVII-B), prohibition on making payment otherwise than through prescribed banking modes beyond threshold limits(Section 40A(3) ), dealing at arm length price while dealing with relatives and associated concerns in which the tax-payer is interested (Section 40A(2)), disallowance of penalties and other payments made for infraction of law(Section 37(1)) , etc. etc. and so on and so forth, which has further bearing on computing income of the tax- payers chargeable to tax. The purpose of framing scrutiny assessment u/s 143(3) of the 1961 Act is , inter-alia, to see that the assessee is maintaining proper records, books of accounts etc. and compliance of various applicable provisions of the 1961 Act are made, to finally arrive at income chargeable to tax and compute tax liability of the tax-payer within the mandate of the provisions of the 1961 Act. In case of non compliances of various applicable provisions of the 1961 Act, consequential penal provisions are prescribed in the 1961 Act itself which will get attracted and which has direct bearing on computing income chargeable to tax. The ld. CIT(A) in the first round of appeal accepted replies/explanations/submissions/ evidences etc. filed by the assessee without calling for remand report/comments from the AO in breach of Rule 46A of the 1962 Rules and even no opportunity of heard was granted as prescribed u/s 250(1) and 250(2) of the 1961 Act, and granted substantial relief to the assessee. The assessee did not filed any appeal before tribunal against the additions confirmed by ld. CIT(A).We have set aside the appellate order of ld. CIT(A) on the grounds raised by Revenue in its appeal before tribunal, and appeal is now restored at its original level. Needless to say that powers of ld. CIT(A) are co- terminus with the powers of ld. AO. It is relevant to refer at this stage to the decision

ITA No.139/Vns/2020 Assessment Year: 2017-18 DCIT, Circle-1, Varanasi, U.P. v. Perfect Techno Consultants Pvt. Ltd. of Hon’ble Supreme Court in the case of CIT v. Devi Prasad Vishwanath reported n (1969) 72 ITR 194(SC), wherein Hon’ble Supreme Court observed as under: “There is nothing in law which prevents the Income-tax Officer in an appropriate case in taxing both the cash credit, the source and nature of which is not satisfactorily explained, and the business income estimated by him under section 13 of the Income-tax Act, after rejecting the books of account of the assessee as unreliable. This was so decided in Kale Khan Mohammad Hanif v. Commissioner of Income-tax [1963] 50 ITR 1 (SC). Whether in a given case the Income- tax Officer may tax the cash credit entered in the books of account of the business, and at the same time estimate the profit must, however, depend upon the facts of each case.” So far as reliance on the case laws relied upon by the ld. Counsel for the assessee is concerned, they are not applicable to the fact situation and also keeping in view the express provisions of Section 250(1), 250(2) of the 1961 Act and Rule 46A of the 1962 Rules, which clearly are infringed in the instant case. These cases relied upon by ld. Counsel for the assessee deals with power of ld. CIT(A) to set aside the issues in appeal to the file of the AO for fresh adjudication, which power now stand withdrawn by the Act, or these cases deal with power of ld. CIT(A) to enhance assessment, which power is in any case undisputed, in view of provisions of Section 251 of the 1961 Act, and presently we are not seized of the either of the aforesaid fact situation. Thus, in view of facts and circumstances of the case, the appeal of the Revenue is allowed for statistical purpose, in the manner indicated above.We clarify that we have not commented on the issues on merits raised by the Revenue in this appeal. We order accordingly. 7. In the result, the appeal of the Revenue is allowed for statistical purposes. Order pronounced on 13/04/2023 at Varanasi, U.P. in accordance with Rule 34(4) of the Income Tax(Appellate tribunal) Rules, 1963. Sd/- Sd/- [PAVAN KUMAR GADALE] [RAMIT KOCHAR] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 13/04/2023 Sh

ITA No.139/Vns/2020 Assessment Year: 2017-18 DCIT, Circle-1, Varanasi, U.P. v. Perfect Techno Consultants Pvt. Ltd. Copy forwarded to: 1. Appellant –The Deputy Commissioner of Income-tax, Circle-1, AayakarBhawan, M A Road ,Varanasi-221002,U.P. 2. Respondent –M/s Perfect Techno Consultants Private Limited, N-1/65-A, Narrotam Nagar Colony, Nagwa, Lanka Varanasi-221005, U.P. 3.The ld.CITDR , ITAT, Varanasi, U.P. 4. The ld. CIT, Varanasi,U.P. 5. The ld.CIT(A), Varanasi, U.P. 6. The Guard File Sr. P.S.